April 14, 2021
April 14, 2021
Two significant victories headlined state tax debates in the past week, as New Mexico leaders improved existing targeted tax credits to give bigger boosts and reach more families in need, and West Virginia lawmakers unanimously shut down a destructive effort to eliminate the state’s progressive income tax. These developments follow last week’s major wins for progressive taxation and targeted assistance in New York, and more good news is likely soon as Washington legislators continue to advance their own targeted credit for working families. Not all the news is positive though, as costly and/or regressive tax cuts remain on the table in states including Florida, Iowa, Ohio, and others.
Major State Tax Proposals and Developments
- A recently signed NEW MEXICO bill dramatically expands the Working Families Credit (WFC) and the Low-Income Comprehensive Tax Rebate. The law allows taxpayers without a Social Security number and those as young as 18 to qualify for the WFC, and increases the credit amount from 17 percent of the federal Earned Income Tax Credit to 25 percent beginning in 2023. -MARCO GUZMAN
- In a matter of days, the WEST VIRGINIA Senate passed their version of income tax elimination and the House, citing the need for additional information and discussion, opted to not take up the tax bill for a vote. The proposal, like similar plans before it, would have resulted in a major tax shift to benefit the wealthy. Gov. Jim Justice then criticized House members for this decision, leading to a 0-100 vote against the measure, effectively killing the debate… for now. -AIDAN DAVIS
- Thirteen years after initially creating—but never funding or implementing—a “Working Families Tax Exemption” styled after the federal Earned Income Tax Credit (EITC), WASHINGTON lawmakers are finally on the verge of actually putting the innovative policy into practice. The House and Senate have now each approved a redesigned version of the exemption, which now only needs one more round of approval from the House and Gov. Jay Inslee’s signature. -DYLAN GRUNDMAN O’NEILL
- An ARKANSAS bill to phase out the state’s soda tax failed on Tuesday. A new bill was introduced this week to tax car sharing platforms as well as numerous proposals to increase a variety of existing tax credits.
- The ALABAMA Senate approved a measure that would allow gambling; the new state revenue would be used for postsecondary scholarships, a fund for education retirees, and reducing the state sales tax on groceries.
- ARIZONA Republicans are pushing for a 2.5 percent flat tax as a part of a $1.7 billion tax cut package.
- FLORIDA continues to debate questionable tax proposals; the Senate Finance and Tax Committee will vote on bills to reduce state corporate income taxes, allow corporations to deduct 100% of business meals, and expand property tax cuts to those reselling timeshares. At the same time, Florida has proposed budget cuts to hospitals and universities.
- The IOWA Senate passed a bill that would reduce available funding for schools and other priorities by hundreds of millions of dollars through a combination of property tax cuts, local aid decreases, and acceleration of previously approved income tax cuts.
- KENTUCKY Gov. Andy Beshear vetoed a bill that would have provided millions in untargeted tax breaks to corporations that open data centers within the state and to remote workers employed by out-of-state companies.
- The LOUISIANA legislative session started this Monday. Lawmakers are likely to discuss strategies for expanding the tax base while cutting tax rates for businesses. They will also consider centralizing tax collections at the state level.
- A recent proposal in MAINE would add a surcharge to second homes that are left vacant for six or more months each year. Revenue raised would be targeted to boost funding for affordable housing.
- The MARYLAND legislative session ended on Monday. Some popular bills ultimately failed such as a proposal to legalize marijuana and proposals to increase the state’s top marginal income tax rate. The legislature approved sports betting and amended the controversial digital advertising tax bill.
- The MASSACHUSETTS House has proposed their budget plan. The $47.6 bill fiscal year 2022 budget includes no tax increases.
- Anti-tax interests in NEBRASKA continue to attempt to reduce funding for city, county, school, and community college services by adding red tape and new costs. Lawmakers are currently considering an unfunded mandate requiring localities to send residents postcard invitations to special hearings each time property taxes are set to increase, even if just for inflationary reasons.
- Lawmakers in NEVADA allowed many bills to die last week as a deadline passed to advance bills from their originating committees in time for consideration this session. Among the tax bills that did not advance were a common-sense floor on property taxes to keep the existing cap from ratcheting funding down over time and a proposal to include professional sports tickets in the state’s Live Entertainment Tax. There may yet be time to expand the state’s consumption taxes to include currently exempt digital goods.
- As part of a budget companion bill, NEW HAMPSHIRE may make it more difficult to both raise and lower unemployment taxes in an effort to stabilize the unemployment trust fund.
- Positive reactions to NEW YORK leaders’ budget deal continue to roll in. In addition to celebrating temporary progressive tax increases on millionaires and large corporations, advocates are cheering the inclusion of $2.1 billion in aid for workers left out of federal pandemic relief and the smart decision to de-couple from the federal “opportunity zone” tax break for wealthy developers.
- Just yesterday, the OHIO House proposed a 2 percent across-the-board cut in state income taxes. The continual push to reduce reliance on the state’s income tax would be coupled with changes to the state’s K-12 school funding formula.
- TENNESSEE Gov. Bill Lee’s proposed budget includes two new sales tax holidays and a proposal to cut the professional privilege tax by 25 percent.
- WEST VIRGINIA Senators adopted a resolution, which would ultimately lead to a Constitutional amendment, to lower personal property taxes paid by businesses on inventory, machinery and equipment. The resolution would also lower taxes that individuals pay on their vehicles.
- The WISCONSIN General Assembly approved a bill that would eliminate the sales tax on bars and restaurants over three months in the summer, which could cost counties more than $150 million in lost revenue.
What We’re Reading
- The On The Issues with Michele Goodwin podcast has a new episode featuring experts Dorothy A. Brown, Maura Quint, and Demi Stratmon on topics such as the intersection of racial justice and tax policy and the prospect of DC statehood.
- New York Magazine also interviews Dorothy A. Brown on her important recent work on taxes and race.
- Route Fifty covers President Biden’s plans for state and local aid as well as how cities are preparing to use the much-needed local aid included in recent Covid-relief legislation.
- Governing discusses digital ads taxes and how states may be able to navigate difficult legal details to generate revenue from tech giants.
- The Hustle provides a succinct and helpful explanation of why Delaware is technically home to nearly 1.5 million corporations and how this situation came to be.
- The Oregon Center for Public Policy uses ITEP data to show how the state’s upside-down tax code stands in the way of shared prosperity for Oregonians.
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